I was digging in my garden the other day, remembering our country right before the 'big crash' happened. I can recall just a few short years ago, when I would be driving through Washington/Portland, Oregon area, and everywhere you looked there were new buildings going up, new housing developments, new businesses being opened, tons of highway projects being worked on. Then in about six months, it all just came apart. It was stunning, when I think about how quickly this change happened in our nation.
The devastation when you look at the full picture is absolutely incomprehensible. All of a sudden, friends of mine were loosing their jobs, their homes, their life savings, their pension funds, all of the hard earned equity in their homes wondering where their next meal was going to come from. Several of my friends were illegally foreclosed upon, and received absolutely no support from the State AG's offices or the HAMP program.
This made me ask myself a simple question: What would America look like today, had this financial crash not occurred?
This may seem like a strange question to other people, but let me take this question a bit further:
Do you suppose that this new so called shared sacrifice, austerity program, the Cat Food Commission and the Gang of six would be part of the political discussion going on in Washington DC right now, had the 'regulators and key financial oversight officers' actually had done their job, and avoided this crash? I think not.
And excuse me, but it certainly does not help so see that one of new and better Democrats, Congressman Barney Frank is again allowing the new Frank-Dodd reform regulations to drag on and on, because according to him, 'these matters are very complicated.' No they aren't Barney. It wasn't complicated when billions of money were being stolen from under our noses and you knew this was going on. Once again, this is yet another indication of Congress 'not doing their damn job' to allow Wall St./the Banks to get away with their nefarious ways, pure and simple.
Deadlines for many of the rule makings mandated by last summer’s financial reform legislation have slipped, leaving the implementation dates for some key measures up in the air.
The Dodd-Frank Act mandated that dozens of rule makings be completed within either nine months or a year of the bill’s enactment. Nine months have now passed. The one-year mark is fast approaching. Much remains undone.
But Rep. Barney Frank (D-Mass.), who championed the bill in the House last year, isn’t concerned about the delays. “There are a lot of complicated rules there,” he said. “I believe all the agencies are working hard to try to complete them.”
http://www.huffingtonpost.com/...
So just give me break Barney OK? This is simply more of the same, as the Banks are now continuing to rip off consumers with new fees for the use of ATM cards:
If you want to understand inside the Beltway politics, proceed immediately to a superb article by Zach Carter at Huffington Post, “The Swipe Fee War”. It is a meticulously reported piece over the number one fight in the nation’s capital, which contrary to headlines, is not the budget battle but proposed regulations over debit card fees, otherwise known as “interchange” fees. As Felix Salmon, Katie Porter, and Adam Levitin have written, the reason this battle is so hard fought is that it pits two big spending constituencies against each other: banks versus retailers, or as one Senator broke it down further:
The big greedy bastards against the big greedy bastards; the big greedy bastards against the little greedy bastards; and some cases even the other little greedy bastards against the other little greedy bastards.
The Carter story is full of juicy vignettes: Bernanke lying badly on behalf of banks; WalMart fabricating alarmist Fed statistics; various Congressmen hand wringing as to which group they should sell themselves to align with; the repeated flip flops of the mercenary NAACP. If we had sensible anti-trust precedents, this abuse of a oligopoly powers could be handled there, but the successful efforts of law and economics movement to indoctrinate judges have made that a non-starter, leaving the legislature as the best avenue for containing financial services industry rent-seeking. The ugly spectacle of this much time and effort being spent by various pigs at the trough as to how they whack up the economic pie, as opposed to create new products and services, is compelling proof of the need to regulate financial services firms as utilities. If these swipe card rules go through, it would be a welcome small step in that direction.
http://www.nakedcapitalism.com/...
I just love that quote: The big greedy bastards, etc. And recently we've seen that play out again, as Tom Miller, the AG has been fully exposed as trying to sell out all 49 of the other State Attorney General's in a rush to white wash the Banks responsibility for the illegal foreclosures, and letting them off the hook, so that Miller can stuff his own 'greedy bastard' coffers with campaign contributions from the financial sectors. Hat tip, to Matt Taibbi, on that one.
And the beat goes on, the beat goes on. Another article that was outstanding was this was from Fire Dog Lake:
Bernanke To the Unemployed: Drop Dead
By: David Dayen Wednesday April 27, 2011 1:40 pm
I bugged out of the Ben Bernanke press conference shortly after he answered the crucial question. The questions were generally terrible, many of them dealing with things where Bernanke has no role whatsoever – gas prices (though he never mentioned over-speculation), fiscal policy and the deficit – and not the biggest problem facing the country, the jobs crisis. But one reporter finally raised the issue. “What can do you to increase the pace of job creation, and why aren’t you doing it,” was essentially the meat of the question.
And Bernanke answered that, while he has been engaged in extraordinary efforts to aid the economy, he had to be concerned about inflation as well. So basically, the Fed is failing at one of their mandates (maximizing employment) because they’re worried about their other mandate (price stability)… which they are ALSO FAILING AT! There’s also no awareness that, if inflation rises unacceptably, you can deal with it at that time. Refusing to stop the human suffering of mass unemployment because of the possibility of an inflation rise that can be dealt with if it happens is just a giveaway that the inflation mandate matters overwhelmingly more than the employment mandate.
I think Matt Yglesias captures this dynamic pretty well.
Imagine you’re teaching a kid archery. You tell him to aim for the bullseye. But you also warn him that if the arrow goes to the left of the bullseye, he’s going to be in big trouble while if it goes to the right of the bullseye you won’t really mind. Well, naturally the kid’s never going to hit the bullseye. He’s going to shoot too far the right. And that’s the Fed right now. They’ll act to prevent total collapse of output and employment but what really worries them is inflation. They’re so worried about inflation that they’re happy to have an output gap that persists for years and years and years.
http://news.firedoglake.com/...
But a few moments this week, did bring a smile to my face: Watching that clown, carnival barker, and malignant narcissist, Donald Trump get totally punked by President Obama, and also watching the Republicans get 'drilled baby drilled,' (like Paul Rand) by their own constituents at town hall meetings, who are finally figuring out, that low and behold, (can I get a Hallelujah?) they don't want anyone touching their social security, medicaid or medicare.
Makes you wonder if the Gang of Six, is listening doesn't it?
Well guess what? It makes me wonder if this so called austerity movement, the Cat Food Commission and the Gang of Six (same difference) would never have shown up in the first place if the 'crash' had not been allowed to have occurred, and to be covered up, as it has.
I am truly hoping that this carnival atmosphere will finally settle down, and that we can get back to the issues at hand. As a Democrat my issues remain the same: Where are the jobs? When will the homeowners of this nation get some relief and some help, and the laws of reform be implemented and restored? When will the endless wars end? These are not my only issues, just the top three.
One of the people who I admire deeply as a truth teller and great writer, is Charles Hughes Smith. He wrote an amazing article that I wanted to share in full with all of you, because it provides the figures, the analysis and the evidence to exactly how deeply destroyed the Middle Class has become as a result of the housing bubble.
Mr. Smith was kind enough to give me permission to include this entire article on DailyKos and I will be happy to send to any of the administrators on this site, the email Mr. Smith sent to me, should they ask for it.
You can reach Charles Hughes Smith on his blog and website at:
http://www.oftwominds.com/...
The Housing Bubble Broke the Middle Class (April 27, 2011)
The bursting of the housing bubble wiped out half of the net worth of the Mortgaged Middle Class.
On the face of it, American households were not that affected by the bursting of the housing bubble. If we look at the Fed Flow of Funds report, the Balance Sheet of Households and Nonprofit Organizations, we find that net worth only declined by about 11% ($7.3 trillion) from 2007 to 2010: a $2.9 trillion decline in financial assets and a $4.9 trillion decline in tangible assets, i.e. real estate and consumer durable goods.
Here are the basic numbers, rounded, in trillions:
total assets:
2007 $78.5 trillion
2010 $70.7
Liabilities:
2007: $14.4
2010: $13.9
Net worth:
2007: $64.2
2010: $56.8
Financial assets:
2007: $50.5
2010: $47.6
Tangible assets:
2007: $28.0
2010: $23.1
Most of the decline in assets results from the popping of the real estate bubble: $6.3 trillion of the $7.3 trillion decline is housing:
Real estate:
2006: $22.7
2010: $16.4
Despite massive write-offs from millions of foreclosures, mortgage debt barely budged:
Mortgages:
2007: $10.5
2010: $10.0
Ditto consumer credit, essentially flat: no deleveraging here:
Consumer credit:
2007: $2.55
2010: $2.43
This is a better reflection of the true devastation left by the bubble: I will explain why below:
Owners equity as percentage of real estate:
2006: 56.5%
2010: 38.5%
Despite the 100% rally off the March 2009 low, stocks and mutual fund assets are still down by a trillion dollars:
Corporate equities and mutual fund shares:
2007: $14.2
2010: $13.2
Households pulled money out of stocks and put it into Treasury bonds. Yeah, the public really bought the stock rally....
Treasury securities:
2007: $255 billion
2010: $1.0 trillion
Cash clicked up a bit:
Savings and money market funds:
2007: $7.2
2010: $7.5
On the surface, this rise in income looks good, too bad the increase is mostly Federal transfers of borrowed money:
Disposable personal income (SAAR):
2007: $10.4
2010: $11.5
If we look beneath the surface at the distribution of wealth, the picture isn't so benign. Over the years I have often posted the basic facts of wealth distribution and housing in the U.S., for example Will Delinquencies Trigger a New American Revolution? (April 7, 2008).
The numbers have changed from 2008, of course, but the basic outlines and percentages have not.
Beneath the surface, most of the income and wealth is held by the top 10% of households. Over a quarter of households are at or below the poverty line; they have no appreciable assets and depend heavily on government transfers.
Almost half of the total income (47%) goes to the top 10%, and 21% flows to the top 1%.
Over 18% of personal income is transfers from the Federal government, most of which is borrowed, of course: Reliance on Uncle Sam hits a record :
A record 18.3% of the nation's total personal income was a payment from the government for Social Security, Medicare, food stamps, unemployment benefits and other programs in 2010. Wages accounted for the lowest share of income — 51.0% — since the government began keeping track in 1929.
From 1980 to 2000, government aid was roughly constant at 12.5%
If we extrapolate the additional 6% increase in transfers, that comes to $700 billion. So roughly 70% of the increase in personal income was simply money borrowed by the Federal government (recall the $1.6 trillion annual Federal deficit) and distributed to the citizenry. In other words, people aren't making more money--the Central State is simply borrowing more and it's being counted as "income" when it's distributed.
There are about 105 million households in the U.S. and about 72 million owner-occupied dwellings. Roughly 25 million are owned free and clear, and 48 million have a mortgage.
Let's look at homeowner's equity, which stands at 38.5%. Equity is what's left if you sell your house and pay off the mortgage.
About 27% of all homeowners (13 million) are underwater, i.e. their house is worth less than their mortgage. This is called negative equity, but in practicality it means zero equity.
Since a third of all homes are owned free and clear, then their equity is 100%. Assuming a broadly even distribution of these homes owned without mortgages (most likely, the majority are owned by elderly people who paid off their mortgages), then we can conclude that 33% of total owner's equity resides in these homes owned free and clear.
That leaves 5.5% of total equity spread among the 35 million mortgaged homes which are not underwater.
Calculated another way: household real estate is worth $16.4 trillion, and there is $10 trillion in outstanding mortgage debt, so total equity is $6.4 trillion. One-third of homes are owned free and clear, so one-third of $16.4 trillion is $5.4 trillion. $6.4 trillion - $5.4 trillion = $1 trillion in equity spread over 35 million homes.
That's not much--roughly 1.8% of all household net worth.
The family house was the traditional foundation of household wealth. As for all those trillions in financial wealth--as we all know, 83% is owned by the top 10%.
So here's the reality: over one-fourth of all households are at or below the poverty line: 28 million.
The top 10%--10.5 million households--own the vast majority of the financial assets ($45 trillion)(the total owned by non-profits is not broken out).
The next 10% own 10% of this wealth, or about $4 trillion. So the top 21 million households own 93% of all financial wealth.
The Great Middle Class between those in poverty and the top 20%--56 million households-- owns about $2.7 trillion in financial wealth, and the millions with mortgages own an additional $1 trillion in home equity. That comes to $3.7 trillion, or about 6.5% of the total household net worth.
Consumer durables--all the autos, washing machines, jet-skis, etc.--are worth about $2.2 trillion ($4.6 T = $2.4 T in consumer debt). Add the durables and the other wealth, and the Great Mortgaged Middle Class holds about 10% of the total household wealth ($5.9 trillion).
Before the housing bubble, households owed about $5 trillion in mortgages. The housing bubble came along, introducing the fantasy of home-as-ATM-cash-withdrawal-machine, and mortgages ballooned to over $10 trillion.
Back at the top of the bubble, the middle class had $6 trillion more assets on the books. Considering the Mortgaged Middle Class now owns about $6 trillion in net assets, then the bursting of the housing bubble caused their net worth to drop by 50%.
I'm not making any political statement here--these are the numbers.
http://www.oftwominds.com/...
I am ending this diary by thanking Mr. Smith for allowing me to use this entire article, as he provides:
Just the facts, just the numbers, just the evidence.
So thank you so much Charles. I will send this diary and the comments and questions to you after it has been addressed.
So, just let this sink in people:
The bursting of the housing bubble wiped out half of the net worth of the Mortgaged Middle Class.
And remember, these figures do not represent how many Wall St./Bankers got away with billions of taxpayer dollars and are still scoring huge profits off of that same money.
If you don't believe this 'austerity movement, the Cat Food Commission and the Gang of Six' are not related to then you perhaps you might understand this:
This is what the US economy has been reduced to: McDonalds reports that as part of its employment event to hire 50,000 minimum wage, part-time (mostly) workers, subsequently raised to 62,000 it received a whopping 1 million applications, or a Tim Geithner jealousy inducing 6.2% hit rate (h/t X. Kurt. Osis). Alas, the US economy is now so pathetic that the bulk of the population will settle for anything. Literally anything. And the saddest part: over 938,000 applicants were turned away. Here's hoping to Burger King needs a few million janitors in the immediate future too. And yes, aside from reality, things in America are really recovering quite nicely.
http://www.zerohedge.com/...
About 8.2 million idled workers were receiving unemployment benefits as of the week ended April 9, the Labor Department said in its weekly jobless claims report. This compares with about 10.5 million individuals at the same time last year, resulting in a decline of roughly 2.3 million people.
The federal government estimates that the economy created 1.3 million jobs during the 12 months ended in March.
“That leaves, roughly speaking, about 1 million people who have exhausted their unemployment benefits and have very likely not yet found a job,” said Joshua Shapiro, chief U.S. economist at MFR Inc. in New York.
http://blogs.wsj.com/...
Now those two quotes, both say a great deal to me.
1. Where are the Jobs Democrats and Republicans?
2. When will someone in our government address the housing crisis and make the Banks/Wall St. pay their fair share?
3. When will the endless wars end?
4. Note to Congressman Barney Frank: This is not complicated, Do your job, and stop the stalling tactics.
I'm a proud Democrat, and I will remain so, and yes, I know we are in for the fight of our lives, but surely, we can all be brave enough and strong enough, to leave this silly carnival behind us, and make our own Democrats, better Democrats, can't we?
Thank you as always.
Ms. B.